Federal Realty Investment Trust Announces First Quarter 2020 Operating Results

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May 06, 2020, 16:05 ET

ROCKVILLE, Md., May 6, 2020 /PRNewswire/ -- Federal Realty Investment Trust (NYSE: FRT) today reported operating results for its first quarter ended March 31, 2020. For the three months ended March 31, 2020 and 2019, net income available for common shareholders was $0.70 per diluted share and $0.78 per diluted share, respectively.

Highlights for the quarter and subsequent events include:

Generated funds from operations available for common shareholders (FFO) per diluted share of $1.50 for the quarter compared to $1.56 in first quarter 2019.
Signed leases for 466,453 sf of comparable space in the first quarter at an average rent of $26.78 psf and achieved cash basis rollover growth on those comparable spaces of 5%, 14% on a straight-line basis.
Declared a regular quarterly cash dividend of $1.05 per common share, resulting in an indicated annual rate of $4.20 per common share payable on July 15, 2020 to common shareholders of record as of June 22, 2020.
Sold 1 building on Colorado Boulevard in Pasadena, California subsequent to quarter end for $16.1 million.
Drew down $990 million of the $1 billion revolving credit facility in March 2020.
Closed on a new $400 million unsecured term loan. Proceeds will be used to repay balances outstanding under Federal Realty's $1 billion credit facility.

"Our thoughts and prayers go out to all of those impacted by the virus itself along with great thanks and respect for those operating every day on the front lines," said Donald C. Wood, President and Chief Executive Officer. "Our company went into this pandemic in a very strong position both from an operating and balance sheet perspective and fully expect to emerge retaining our market leadership position given our superior real estate and financial liquidity and flexibility."

Financial Results

Net income available for common shareholders was $52.8 million and earnings per diluted share was $0.70 for first quarter 2020 versus $58.1 million and $0.78, respectively, for first quarter 2019.

In the first quarter 2020, Federal Realty generated FFO of $114.3 million, or $1.50 per diluted share. This compares to FFO of $116.9 million, or $1.56 per diluted share, in first quarter 2019.

FFO is a non-GAAP supplemental earnings measure which the Trust considers meaningful in measuring its operating performance. A reconciliation of FFO to net income is attached to this press release.

Portfolio Results

The portfolio was 93.6% leased as of March 31, 2020, and the comparable portfolio was 94.2% leased. In first quarter 2020, comparable property POI decreased -2.5%. This metric was negatively impacted by COVID-19 related impacts of -1.7% and a negative lease termination fee impact compared to first quarter 2019 of -1.8%. Comparable property POI represents our consolidated property portfolio other than those properties that distort comparability between periods in two primary categories (1) assets that were not owned for the full quarter in both periods presented and (2) assets currently under development or being repositioned for significant redevelopment and investment.

During the first quarter 2020, Federal Realty signed 82 leases for 491,003 square feet of retail space. On a comparable space basis (i.e., spaces for which there was a former tenant), Federal Realty leased 466,453 square feet at an average rent of $26.78 per square foot compared to the average contractual rent of $25.58 per square foot for the last year of the prior leases, representing a cash basis rollover growth on those comparable spaces of 5%, 14% on a straight-line basis.

Regular Quarterly Dividends

Federal Realty also announced today that its Board of Trustees declared a regular quarterly cash dividend of $1.05 per common share, resulting in an indicated annual rate of $4.20 per common share. The regular common dividend will be payable on July 15, 2020 to common shareholders of record as of June 22, 2020.

Federal Realty's Board of Trustees also declared a quarterly cash dividend on its Class C depositary shares, each representing 1/1000 of a 5.000% Series C Cumulative Preferred Share of Beneficial Interest, of $0.3125 per depositary share. All dividends on the depositary shares will be payable on July 15, 2020 to common shareholders of record as of July 1, 2020.

Summary of Other Quarterly Activities and Recent Developments

April 21, 2020 – Federal Realty sold the historic Pottery Barn building at the intersection of Colorado Boulevard and Fair Oaks Avenue in Old Pasadena, California, one of the most high-profile retail streets in Southern California. The building was part of the Colorado Boulevard property and was sold for $16.1 million.

May 6, 2020 – Federal Realty closed on a new $400 million unsecured term loan. Proceeds will be used to repay balances outstanding under the Company's $1 billion unsecured credit facility. The term loan bears interest at LIBOR plus 135 basis points and will mature in May 2021, with an option to extend the loan until May 2022.

COVID-19 Update (as of May 1, 2020):

All 104 properties are open and operating.
Approximately 53% of total April 2020 billed recurring rents have been collected to date.
Approximately 47% of our commercial tenants are open and operating based on annualized base rent. Annualized base rent reflects the aggregate, annualized in-place contractual (defined as cash-basis excluding rent abatements) minimum rent for all occupied spaces as of March 31, 2020.
Construction activity has paused at Assembly Row, Santana West, and other redevelopments and smaller projects. Construction activities continue at Pike & Rose and other redevelopments and smaller projects although at a slower pace as COVID-19 safety protocols are observed at all sites.
$995 million of cash and cash equivalents as of March 31, 2020. Pro forma for the recent unsecured term loan financing, as of March 31, 2020, Federal Realty had approximately $1.4 billion of liquidity in cash and undrawn availability under its revolving credit facility.
Previously withdrew 2020 guidance given the complex and rapidly evolving circumstances around the COVID-19 pandemic.

Additional information on the impact of the COVID-19 pandemic on the Company's business to date is available in a presentation posted on the Investor section of Federal Realty's website.

Conference Call Information

Federal Realty's management team will present an in-depth discussion of Federal Realty's operating performance on its first quarter 2020 earnings conference call, which is scheduled for Thursday, May 7, 2020 at 8:00AM ET. To participate, please call 877.445.3230 five to ten minutes prior to the call start time and use the passcode 3585364 (required). The teleconference can also be accessed via a live webcast at www.federalrealty.com in the Investors section. A replay of the webcast will be available on Federal Realty's website at www.federalrealty.com. A telephonic replay of the conference call will also be available through May 21, 2020 by dialing 855.859.2056; Passcode: 3585364.

About Federal Realty

Federal Realty is a recognized leader in the ownership, operation and redevelopment of high-quality retail-based properties located primarily in major coastal markets from Washington, D.C. to Boston as well as San Francisco and Los Angeles. Founded in 1962, Federal Realty's mission is to deliver long-term, sustainable growth through investing in densely populated, affluent communities where retail demand exceeds supply. Its expertise includes creating urban, mixed-use neighborhoods like Santana Row in San Jose, California, Pike & Rose in North Bethesda, Maryland and Assembly Row in Somerville, Massachusetts. These unique and vibrant environments that combine shopping, dining, living and working provide a destination experience valued by their respective communities. Federal Realty's 104 properties include approximately 3,000 tenants, in 24 million square feet, and over 2,700 residential units.

Federal Realty has increased its quarterly dividends to its shareholders for 52 consecutive years, the longest record in the REIT industry. Federal Realty is an S&P 500 index member and its shares are traded on the NYSE under the symbol FRT. For additional information about Federal Realty and its properties, visit www.federalrealty.com.

Safe Harbor Language

Certain matters discussed within this press release may be deemed to be forward-looking statements within the meaning of the federal securities laws. Although Federal Realty believes the expectations reflected in the forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. These factors include, but are not limited to, the risk factors described in our Annual Report on Form 10-K filed on February 10, 2020 and subsequent quarterly reports on Form 10-Q, and include the following:

natural disasters, climate change and public health crises, including the COVID-19 pandemic, could have an adverse impact on our cash flow and operating results;
risks that our tenants will not pay rent, may vacate early or may file for bankruptcy or that we may be unable to renew leases or re-let space at favorable rents as leases expire;
risks that we may not be able to proceed with or obtain necessary approvals for any redevelopment or renovation project, and that completion of anticipated or ongoing property redevelopment or renovation projects that we do pursue may cost more, take more time to complete or fail to perform as expected;
risk that we are investing a significant amount in ground-up development projects that may be dependent on third parties to deliver critical aspects of certain projects, requires spending a substantial amount upfront in infrastructure, and assumes receipt of public funding which has been committed but not entirely funded;
risks normally associated with the real estate industry, including risks that occupancy levels at our properties and the amount of rent that we receive from our properties may be lower than expected, that new acquisitions may fail to perform as expected, that competition for acquisitions could result in increased prices for acquisitions, that costs associated with the periodic maintenance and repair or renovation of space, insurance and other operations may increase, that environmental issues may develop at our properties and result in unanticipated costs, and, because real estate is illiquid, that we may not be able to sell properties when appropriate;
risks that our growth will be limited if we cannot obtain additional capital;
risks associated with general economic conditions, including local economic conditions in our geographic markets;
risks of financing, such as our ability to consummate additional financings or obtain replacement financing on terms which are acceptable to us, our ability to meet existing financial covenants and the limitations imposed on our operations by those covenants, and the possibility of increases in interest rates that would result in increased interest expense; and
risks related to our status as a real estate investment trust, commonly referred to as a REIT, for federal income tax purposes, such as the existence of complex tax regulations relating to our status as a REIT, the effect of future changes in REIT requirements as a result of new legislation, and the adverse consequences of the failure to qualify as a REIT.

Given these uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements that we make, including those in this press release. Except as required by law, we make no promise to update any of the forward-looking statements as a result of new information, future events, or otherwise. You should review the risks contained in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on February 10, 2020 and subsequent quarterly reports on Form 10-Q.

Investor Inquiries:

Leah Andress Brady

Investor Relations Senior Manager

301.998.8265

[email protected]

Media Inquiries:

Brenda Pomar

Corporate Communications Manager

301.998.8316

[email protected]

Federal Realty Investment Trust
Consolidated Balance Sheets
March 31, 2020
	March 31,		December 31,
	2020		2019
	(in thousands, except share and per share data)
	(unaudited)
ASSETS
Real estate, at cost
Operating (including $1,751,718 and $1,676,866 of consolidated variable interest entities, respectively)	$	7,774,485	$	7,535,983
Construction-in-progress (including $84,034 and $102,583 of consolidated variable interest entities, respectively)	671,486		760,420
Assets held for sale	5,796		1,729
	8,451,767		8,298,132
Less accumulated depreciation and amortization (including $306,861 and $296,165 of consolidated variable interest entities, respectively)	(2,258,994)		(2,215,413)
Net real estate	6,192,773		6,082,719
Cash and cash equivalents	994,688		127,432
Accounts and notes receivable, net	153,243		152,572
Mortgage notes receivable, net	30,332		30,429
Investment in partnerships	25,960		28,604
Operating lease right of use assets	94,147		93,774
Finance lease right of use assets	52,079		52,402
Prepaid expenses and other assets	216,692		227,060
TOTAL ASSETS	$	7,759,914	$	6,794,992
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Mortgages payable, net (including $476,944 and $469,184 of consolidated variable interest entities, respectively)	$	552,813	$	545,679
Notes payable, net	993,752		3,781
Senior notes and debentures, net	2,807,848		2,807,134
Accounts payable and accrued expenses	245,968		255,503
Dividends payable	81,899		81,676
Security deposits payable	21,941		21,701
Operating lease liabilities	74,082		73,628
Finance lease liabilities	72,059		72,062
Other liabilities and deferred credits	150,410		157,938
Total liabilities	5,000,772		4,019,102
Commitments and contingencies
Redeemable noncontrolling interests	159,534		139,758
Shareholders' equity
Preferred shares, authorized 15,000,000 shares, $.01 par:
5.0% Series C Cumulative Redeemable Preferred Shares, (stated at liquidation preference $25,000 per share), 6,000 shares issued and outstanding	150,000		150,000
5.417% Series 1 Cumulative Convertible Preferred Shares, (stated at liquidation preference $25 per share), 399,896 shares issued and outstanding	9,997		9,997
Common shares of beneficial interest, $.01 par, 100,000,000 shares authorized, 75,622,504 and 75,540,804 shares issued and outstanding, respectively	760		759
Additional paid-in capital	3,166,899		3,166,522
Accumulated dividends in excess of net income	(818,284)		(791,124)
Accumulated other comprehensive loss	(7,265)		(813)
Total shareholders' equity of the Trust	2,502,107		2,535,341
Noncontrolling interests	97,501		100,791
Total shareholders' equity	2,599,608		2,636,132
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	7,759,914	$	6,794,992

Federal Realty Investment Trust
Consolidated Income Statements
March 31, 2020
	Three Months Ended
	March 31,
	2020		2019
	(in thousands, except per share data)
	(unaudited)
REVENUE
Rental income	$	230,798	$	231,492
Mortgage interest income	759		735
Total revenue	231,557		232,227
EXPENSES
Rental expenses	44,312		44,260
Real estate taxes	29,064		27,687
General and administrative	10,251		9,565
Depreciation and amortization	62,188		59,622
Total operating expenses	145,815		141,134

OPERATING INCOME	85,742		91,093

OTHER INCOME/(EXPENSE)
Other interest income	308		177
Interest expense	(28,445)		(28,033)
Loss from partnerships	(1,164)		(1,434)
NET INCOME	56,441		61,803
Net income attributable to noncontrolling interests	(1,678)		(1,659)
NET INCOME ATTRIBUTABLE TO THE TRUST	54,763		60,144
Dividends on preferred shares	(2,010)		(2,010)
NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS	$	52,753	$	58,134
EARNINGS PER COMMON SHARE, BASIC:
Net income available for common shareholders	$	0.70	$	0.78
Weighted average number of common shares	75,360		74,200
EARNINGS PER COMMON SHARE, DILUTED:
Net income available for common shareholders	$	0.70	$	0.78
Weighted average number of common shares	75,360		74,200

Federal Realty Investment Trust
Funds From Operations
March 31, 2020
	Three Months Ended
	March 31,
	2020		2019
	(in thousands, except per share data)
Funds from Operations available for common shareholders (FFO)
Net income	$	56,441	$	61,803
Net income attributable to noncontrolling interests	(1,678)		(1,659)
Depreciation and amortization of real estate assets	56,046		53,489
Amortization of initial direct costs of leases	4,900		4,750
Funds from operations	115,709		118,383
Dividends on preferred shares	(1,875)		(1,875)
Income attributable to operating partnership units	790		729
Income attributable to unvested shares	(356)		(344)
FFO	$	114,268	$	116,893
Weighted average number of common shares, diluted	76,208		75,010
FFO per diluted share	$	1.50	$	1.56